DCT

3:17-cv-03510

MCR Oil Tools LLC v. SPEX Offshore Ltd

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I. Executive Summary and Procedural Information

  • Parties & Counsel:
  • Case Identification: 3:17-cv-03510, N.D. Tex., 01/25/2018
  • Venue Allegations: Venue is alleged in Dallas County, Texas, based on an arbitration provision in a 2014 License Agreement between the parties that designates Dallas as the place of arbitration.
  • Core Dispute: Plaintiff alleges that Defendant, its former licensee, breached a license agreement and misappropriated confidential and trade secret technology concerning thermite-based oilfield tools, and then used that technology to file numerous patents in its own name.
  • Technical Context: The technology at issue involves thermite-based or other solid combustible charge-based tools used for cutting, severing, or otherwise manipulating downhole tubulars, such as pipes and casings, in oil and gas wells.
  • Key Procedural History: The dispute centers on a 2014 License Agreement under which Plaintiff MCR licensed its technology to Defendant SPEX. Plaintiff alleges that almost immediately after entering this agreement, SPEX began filing patent applications on technology derived from MCR's trade secrets. The license agreement was extended in 2015 and terminated in May 2016. The complaint is not a suit for patent infringement but rather seeks, among other things, a declaration that MCR is the rightful owner of the technology and patents developed by SPEX.

Case Timeline

Date Event
2014-05-21 2014 License Agreement effective date
2014-09-22 Earliest SPEX patent filing date mentioned in complaint (UK App. 1416720.9)
2014-11-18 Priority date for UK Patents GB2532609 and GB2544616
2015-06-01 2015 License Extension signed
2016-05-21 2014 License Agreement terminates
2016-12-21 UK Patent GB2532609 issues
2017-10-25 UK Patent GB2544616 issues
2018-01-25 Complaint Filing Date

II. Technology and Patent(s)-in-Suit Analysis

The complaint centers on patents filed by the Defendant, SPEX, which are alleged to be derived from Plaintiff MCR's technology. The first two granted UK patents listed are analyzed below.

UK Patent No. GB 2,532,609 B - "Downhole tool"

  • Issued: 21.12.2016.

The Invention Explained

  • Problem Addressed: The patent background describes conventional methods for removing portions of downhole casing or tubing—such as milling tools or hydro-abrasive cutters—as being slow, expensive, and operationally complex (GB 2,532,609 Patent, p. 114, lines 10-30).
  • The Patented Solution: The invention is a tool for manipulating downhole tubulars (e.g., casing or tubing) using a "propellant source." Upon ignition, the propellant deflagrates (burns rapidly) to create a high-energy stream of combustion products. This stream is directed through one or more outlets towards the target tubular to cut, ablate, or otherwise manipulate it. The effectiveness of the stream can be enhanced by including a "modifying agent," such as aluminum oxide particles, which are carried in the stream of combustion products (GB 2,532,609 Patent, Abstract, p. 106; p. 134, lines 1-13).
  • Technical Importance: This energetic, thermite-like approach is presented as a method that is "much faster than conventional processes leading to time and resource savings, and associated reduced costs" (GB 2,532,609 Patent, p. 115, lines 20-23).

Key Claims at a Glance

  • The complaint does not assert specific claims for infringement, but rather claims ownership of the entire patent based on alleged misappropriation. Independent claim 1 is representative of the patented technology.
  • Essential elements of Claim 1 include:
    • A tool for manipulating a tubular in a downhole environment.
    • A housing defining a chamber with at least one outlet.
    • A propellant source located within the chamber.
    • An ignition mechanism for the propellant source.
    • At least one modifying agent.
    • Wherein ignition causes the propellant to deflagrate, creating a stream of combustion products combined with the modifying agent, which is directed through the outlet to manipulate the tubular.

UK Patent No. GB 2,544,616 B - "Downhole tool"

  • Issued: 25.10.2017.

The Invention Explained

  • Problem Addressed: As a divisional of the '609 patent, this patent addresses the identical technical problem: the inefficiency and high cost of conventional methods for removing downhole tubulars (GB 2,544,616 Patent, p. 153, lines 10-25).
  • The Patented Solution: The patented solution is identical to that described in the parent '609 patent, involving a tool that uses a deflagrating propellant source and a modifying agent to generate a stream of combustion products for manipulating a downhole tubular (GB 2,544,616 Patent, p. 154, lines 5-18).
  • Technical Importance: The stated purpose is to provide a faster and less expensive alternative to conventional cutting methods (GB 2,544,616 Patent, p. 154, lines 20-23).

Key Claims at a Glance

  • The complaint seeks ownership of this patent. The claims included in the provided exhibit appear to be the application claims and are identical to those of the '609 patent.
  • Essential elements of Claim 1 are identical to those of the '609 patent, as described above.

Multi-Patent Capsule

  • Patent Identification: UK Patent No. GB 2,537,749 B, "Improved tool," Issued 15.03.2017.
  • Technology Synopsis: This patent describes a method of removing material from a target by providing a tool with a propellant source. Upon ignition, the propellant generates a jet of combustion products that interacts with and removes material from the target (GB 2,537,749 Patent, Abstract, p. 169).
  • Asserted Claims: Ownership of the patent is asserted, not infringement of specific claims.
  • Accused Features: The patent itself is the subject of the dispute, alleged to have been filed in breach of contract using Plaintiff's technology (Compl. ¶21).

III. The Accused Instrumentality

Product Identification

  • The complaint does not identify a specific, commercially named product. It refers to a "thermite or solid combustible charge based product" that Defendant SPEX was allegedly developing (Compl. ¶34) and "replicating MCR's technology through development of its own tools" (Compl. ¶33.a).

Functionality and Market Context

  • The functionality of the accused instrumentality is described as being based on MCR's "thermite-based tools" for cutting oil well pipe downhole (Compl. ¶1). The complaint alleges that SPEX planned to launch this product at or near the beginning of 2018 (Compl. ¶34). The technology embodied in SPEX's patents, such as the '609 Patent, aligns with this description, disclosing a tool that uses a propellant to generate a stream of hot combustion products to cut or manipulate downhole tubulars.

IV. Analysis of Infringement Allegations

The complaint does not allege patent infringement against the defendants. Instead, it alleges that the defendants misappropriated the plaintiff's trade secrets and technology and, in breach of a license agreement, filed for patents on that technology in their own name (Compl. ¶¶ 21, 26, 77). The central dispute is over ownership of the intellectual property embodied in the defendants' patents.

The plaintiff alleges that the technology disclosed in the SPEX patents constitutes "Improvements" to MCR's "Licensed Technology" under the terms of a 2014 License Agreement (Compl. ¶¶ 23, 24). The complaint cites Section 3.04 of that agreement, which states that "any and all patents and trade secrets" related to such improvements "are and shall be owned exclusively by MCR" and that the licensee "hereby irrevocably assigns, conveys, and sells to MCR its entire right, title, and interest in and to all Improvements" (Compl. ¶31). The plaintiff seeks a declaratory judgment that it is the rightful owner of all products and technology invented or developed by SPEX related to thermite-based tools (Compl. ¶44).

  • Identified Points of Contention:
    • Contractual Scope Question: Does the technology disclosed in the SPEX patents, such as the '609 Patent, fall within the contractual definition of "Improvements" to MCR's "Licensed Technology," thereby triggering SPEX's obligation to assign those patents to MCR?
    • Factual Question: What evidence does the complaint provide to show that the technology in the SPEX patents was derived from MCR's confidential information rather than from independent development? The complaint relies on, among other things, the timing of the patent filings relative to the license agreement and a declaration from a former SPEX employee stating that SPEX was "replicating MCR's technology" (Compl. ¶¶ 21, 33).

V. Key Claim Terms for Construction

Because this is not a patent infringement case, the central dispute is likely to turn on the interpretation of contractual terms from the 2014 License Agreement rather than patent claim terms.

  • The Term: "Improvements"

    • Context and Importance: The plaintiff's claim to ownership of the SPEX patents hinges on whether those patents are considered "Improvements" under the 2014 License Agreement. Practitioners may focus on this term because its scope determines whether SPEX had a contractual duty to assign the patents to MCR (Compl. ¶31).
    • Intrinsic Evidence for Interpretation:
      • Evidence for a Broader Interpretation: The agreement defines "Improvements" as "any improvement and/or modification of a device, product, method or process belonging to MCR or its licensor(s)" (Compl. ¶31, fn. 36). Plaintiff may argue that the expansive phrase "any improvement and/or modification" should be read broadly to capture any new development by the licensee in the same technical field as the licensed technology.
      • Evidence for a Narrower Interpretation: Defendant may argue that its patented technology is not an "improvement" or "modification" of MCR's specific licensed products but constitutes a distinct, independently conceived invention that falls outside the contractual assignment obligation.

  • The Term: "Licensed Technology"

    • Context and Importance: The scope of this term defines the underlying technology that was allegedly misappropriated and "improved" upon. The plaintiff's trade secret misappropriation and contract breach claims depend on showing that SPEX's work was based on this specific technology (Compl. ¶23).
    • Intrinsic Evidence for Interpretation:
      • Evidence for a Broader Interpretation: The agreement defines "Licensed Technology" to include "confidential or proprietary information of MCR relating to the Licensed Patents and/or Licensed Products, including, without limitation, know-how, methods, techniques, trade secrets, processes, design and/or performance specifications" (License Agreement §1.06; Compl. p. 39). The phrase "including, without limitation" suggests a broad, non-exhaustive list that could encompass a wide range of related technical information.
      • Evidence for a Narrower Interpretation: Defendant may argue that its patented work is based on general principles in the field or its own independent know-how, and not on specific "confidential or proprietary information...provided by MCR to Licensee pursuant to this Agreement" as required by the contractual definition.

VI. Other Allegations

No probative visual evidence provided in complaint.

  • Breach of Contract: The complaint alleges SPEX breached multiple provisions of the 2014 License Agreement, including its contractual promise that it had not "invented, designed, developed, or improved" any technology related to MCR's Licensed Technology (Compl. ¶19.b) and its obligation to assign all rights in any "Improvements" exclusively to MCR (Compl. ¶31).
  • Trade Secret Misappropriation: Plaintiff brings claims for statutory and common law misappropriation of trade secrets, alleging that SPEX used MCR's confidential information—obtained under the license agreement—for its own commercial benefit to develop competing products and obtain patents in its own name (Compl. ¶¶ 46-55).
  • Fraudulent Inducement: The complaint alleges that SPEX made material misrepresentations in the 2014 License Agreement and 2015 Extension, knowing them to be false, and that SPEX never intended to comply with the terms restricting its own development activities (Compl. ¶¶ 60-61).

VII. Analyst’s Conclusion: Key Questions for the Case

  • A core issue will be one of contractual interpretation: can the technology disclosed in the SPEX patents be defined as an "Improvement" to MCR's "Licensed Technology" under the specific terms of the 2014 License Agreement? The outcome of the breach of contract and declaratory judgment claims will likely depend on the court's interpretation of these key contractual phrases.
  • A key evidentiary question will be one of technological provenance: can MCR demonstrate with sufficient evidence that the inventions claimed in the SPEX patents were derived from confidential information and trade secrets disclosed under the license, rather than from SPEX's independent innovation or information in the public domain?